Question

ABC produces oil at two wells (before the oil price collapsed recently). Well1 can produce uo to 150,000 barrels per day, and Well2 can produce up to 200,000 barrels per day. It is possible to ship oil directly from the wells to Sunco's customers in L.A. and New York City. Alternatively, ABC could transport oil to the ports of Mobile, AL, and Galveston, TX and then ship it by tankers to NY and LA. LA requires 160,000 barrels per day, and NY needs 140,000 barrels per day. Find a best way to minimize the transportation costs while meeting the demand requirements of LA and NY.

Unit shipping costs (per 1000 barrels)
		To
		Well 1	Well 2	Mobile	Galveston	NY	LA
From	Well 1			$3,530	$3,420	$3,920	$3,710
	Well 2			$3,650	$3,580	$3,840	$3,620
	Mobile				$1,200	$3,680	$3,740
	Galveston			$1,500		$3,570	$3,650
	NY						$4,120
	LA					$3,980

Answer 1

Excel model:

Solver inputs:

Solution:

From \ To	Well-1	Well-2	Mobile	Galveston	NY	LA	OUT	Capacity	IN	Capacity + IN - OUT	Demand
Well 1	0	0	0	0	100	0	100	150	0	50	0
Well 2	0	0	0	0	40	160	200	200	0	0	0
Mobile	0	0	0	0	0	0	0	0	0	0	0
Galveston	0	0	0	0	0	0	0	0	0	0	0
NY	0	0	0	0	0	0	0	0	140	140	140
LA	0	0	0	0	0	0	0	0	160	160	160
IN	0	0	0	0	140	160
From \ To	Well-1	Well-2	Mobile	Galveston	NY	LA
Well 1	9,999	9,999	3,530	3,420	3,920	3,710
Well 2	9,999	9,999	3,650	3,580	3,840	3,620
Mobile	9,999	9,999	9,999	1,200	3,680	3,740
Galveston	9,999	9,999	1,500	9,999	3,570	3,650
NY	9,999	9,999	9,999	9,999	9,999	4,120
LA	9,999	9,999	9,999	9,999	3,980	9,999
Total cost	1,124,800

So,

the best way to ship is to ship from Well-1 to NY 100,000 units, Well-2 to NY 40,000 units, and from Well-2 to LA 160,000 units. The total minimum cost will be $1,124,800